Remitly Global, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. Remitly provides digital cross-border money transfers and related financial services. Financial amounts below are in U.S. dollars; millions unless stated otherwise.
Business context and key metrics
Third-quarter active customers rose 51% to 2.56 million, while send volume increased 61% to $5.24 billion. For the first nine months, send volume grew 72% to $14.49 billion. Management attributed growth to customer acquisition, increased transaction frequency and adoption of digital remittances; it also noted that corridor mix affected average send amounts.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $121.2 | $71.8 | $323.4 | $176.9 |
| Transaction expenses | $47.6 | $28.0 | $135.2 | $74.3 |
| Operating loss | $(12.7) | $(1.8) | $(23.2) | $(20.3) |
| Net loss | $(13.0) | $(2.4) | $(22.2) | $(23.6) |
| Adjusted EBITDA (non-GAAP) | $0.3 | $0.6 | $(3.4) | $(13.6) |
Revenue increased 69% in Q3 and 83% year to date. Transaction expenses were 39% of revenue in Q3, unchanged year over year, and 42% year to date, also unchanged. Revenue less transaction expenses was approximately 60.8% of revenue in Q3 versus 60.9% a year earlier; year-to-date it was approximately 58.2% versus 58.0%. These are simple calculations, not a company-reported gross margin.
Q3 operating loss widened despite higher revenue, principally amid increased operating costs. Marketing was $30.4 million, technology and development $18.1 million, and general and administrative expense $24.5 million. G&A included a $6.9 million stock donation and higher IPO and public-company costs. Net loss per share was $(0.41) in Q3 versus $(0.11); year to date it was $(0.85) versus $(1.11). Q3 Adjusted EBITDA declined from $0.6 million to $0.3 million; the year-to-date improvement reflected revenue growth, partly offset by operating investment and higher costs.
Cash flow, debt and liquidity
For the first nine months, operating activities provided $19.4 million of cash, compared with $71.2 million used in 2020. Management attributed the 2021 result largely to working-capital movements, including a $50.3 million increase in customer liabilities, partly offset by a $29.1 million increase in customer funds receivable. Investing activities used $3.3 million. Financing activities provided $239.7 million, primarily from the IPO and concurrent private placement, partly offset by repayment of $80.0 million in borrowings.
At September 30, cash and cash equivalents were $443.3 million, versus $186.7 million at December 31, 2020; total current assets were $647.3 million and current liabilities $172.7 million. The company reported no revolving borrowings and $250 million of unused capacity under its new revolving facility, which matures in September 2026. It had $19.2 million of standby letters of credit outstanding and was in compliance with facility covenants. Management said cash, cash equivalents and available facility capacity should cover working-capital needs for at least 12 months.
Material changes, outlook and risks
Remitly completed its September 2021 IPO, issuing 7.0 million shares at $43 per share, and a concurrent private placement of 581,395 shares. The company reported $305.2 million of net proceeds from the IPO and private placement; existing stockholders also sold shares in the offering. Preferred stock converted into common stock, and the company replaced its prior credit facility with a $250 million revolving facility.
The filing provides no specific forward revenue, earnings or margin guidance. Management expects continued investment in technology and development and notes that fourth-quarter holiday seasonality can raise customer activity, marketing, transaction losses and working-capital needs. It cautions that COVID-19-related demand effects may slow or decline as conditions change, and that interim results are not necessarily indicative of full-year results.
Key disclosed risks include fraud and transaction losses, dependence on payment processors and disbursement partners, regulatory and licensing requirements, foreign-exchange movements, customer and corridor concentration, cybersecurity and service availability, and the possibility that growth investments will not produce sustained profitability. India, the Philippines and Mexico represented approximately 70% of revenue for the first nine months of 2021. The company reported material weaknesses in IT general controls, system access and journal-entry segregation; disclosure controls were deemed ineffective. Remediation was in progress, and management said the weaknesses had not caused a misstatement in the periods presented. Management did not consider ordinary-course litigation likely to result in a material adverse effect, and reported no material change in commitments outside the ordinary course.
Investor verification points
- Assess how much of the positive operating cash flow came from timing and working-capital movements, especially customer liabilities and receivables.
- Review the remediation and independent testing of the disclosed material weaknesses in financial reporting controls.
- Track whether customer growth and send-volume gains translate into improved operating results after marketing, support, fraud and technology costs.
- Monitor fraud and transaction losses, regulatory requirements, and reliance on key payment and disbursement partners.
- Consider holiday seasonality, foreign-exchange exposure and the concentration of revenue in major receive countries when evaluating future periods.
- Review potential equity dilution from outstanding options and RSUs, future equity-plan reserves, and post-IPO lock-up expirations.